A recent Ontario Court of Appeal decision provided clear direction to employers on what NOT to do when terminating employees. The Court of Appeal in Ruston v. Keddco Mfg. (2011) Ltd., 2019 ONCA 125 affirmed the trial decision. At trial the Court awarded $100,000 in punitive damages against the employer for the manner of termination and the way that they had handled events post termination, including at trial. The factors that the Court of Appeal considered to support the punitive damages award included the following:
- During the termination meeting the employer alleged fraud as a reason for terminating the employment for cause;
- During the termination meeting the employer refused to provide the dismissed employee with the particular allegations of fraud;
- During the termination meeting the employer attempted to intimidate the employee by threatening to counterclaim against him if the employee sued for wrongful dismissal;
- In the Statement of Defence and Counterclaim the employer alleged that it was owed $1.7 million in damages based on the allegations of fraud;
- The employer called no witnesses at trial that could substantiate the allegations of fraud;
- In addition to the allegation of fraud, the employer alleged several other grounds for termination, all of which they did not pursue at trial;
- In the middle of the trial the employer reduced its fraud claim from $1.7 million to $1.00; and
- The court found that the serious allegations that the employer made against the employee were entirely unfounded.
In addition to awarding $100,000 in punitive damages, the Court of Appeal upheld the award of substantial indemnity costs, which would be the equivalent to special costs in British Columbia. Special costs are awarded to further punish a litigant and to express the rebuke of the courts. In Ruston the costs award was $546,684.73. The total punitive award, taking into consideration the costs and punitive damages was almost $650,000.00 and was more than the damages awarded in the claim itself.
This case serves as a significant reminder for employers of what not to do when terminating an employee. Decisions to terminate for cause should not be made lightly and should only be made when there is significant evidence justifying any cause allegation, particularly if it involves wrongdoing such as fraud. As well, employers should at all times avoid threatening a counterclaim against an employee. If an employer determines that they simply do not have the evidence to justify what they originally thought, the allegation of cause should be abandoned prior to the trial.
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